Archives for September 2015

There’s no question that employee handbooks are an invaluable tool for managers. In my view, few should be without the benefits they bring in terms of both communicating with workers and management’s own understanding of the myriad employment laws that may apply on the job. That said, employers need to understand that, when they include a policy in a handbook, they need to respect it. Those who don’t proceed at their own legal peril.

Massachusetts courts have long permitted employees to claim that the terms of an employee handbook form part of a contract that their employers need to follow. Though claims like those are tough to win, former workers sometimes see good reason to try nonetheless. That may be because, as with any lawsuit, outcomes are uncertain, regardless what one may believe about a claim’s merits. Since all must be defended at often substantial cost, defendants who face lawsuits often figure out quickly that it’s better to settle than to fight to the death, as it were. When it comes to suits over the terms of an employee handbook, the primary way an employer can avoid a predicament like that is to strictly follow the terms of the policies it publishes to its workers. If you don’t like a policy, change it – prospectively only, of course. Until that is done and conveyed to workers, all policies should be complied with by employer and employee alike.

A recent case in the U.S. District Court illustrates the perils companies can face when they don’t follow this tact. In Grant v. Target Corp., a former employee is complaining that Target fired him in violation of policies and procedures in its employee handbook. When Target moved to dismiss the suit, the court refused. Though Target claimed, among other things, that it retained rights to change its handbook at any time, the court concluded it must still deal with the employee’s claim that, when he was fired for intoxication at work, Target’s policies were violated. Though Target may ultimately win the case, it will not do so before expending substantial time and effort. In the end, it will need to prove either that its handbook did not form the basis for a contract or that the contract it did form was followed. Unfortunately for the employer, the process is not likely to be cheap.

Starting a business brings many challenges. Among them is the often overlooked need to create and retain records of employee hours and pay. Many small companies have found out the hard way that failing to do so can lead to severe penalties.

In Massachusetts, employers need to maintain records that include employee names, addresses and occupations, amounts paid each week, and hours worked daily and weekly. All of this is open to inspection by state and federal wage authorities, and fines can be levied for a failure to properly keep records. Often even worse than this are wage-related damages an employer can face if records are not available to defend against claims brought by former employees or the government. Because employers are obligated to keep pay records, those who don’t do so face the prospect of having a court accept as true whatever claims employees may make about the number of hours they worked and the amount of pay they received for that work. That can lead to the triple damage and legal fee awards against them.

The Massachusetts Attorney General aggressively pursues claims brought by former employees. The AG can audit records for individual employees or entire staffs, with major financial implications. In one recent case, an employer paid $300,000 in back wages and penalties as the result of an AG audit. Employers faced with these sorts of inquiries normally have little flexibility when transgressions of the law are identified. They either settle with the government, normally at a substantial cost, or face enforcement action that can lead to far higher penalties. In some cases, employees bring class action claims that can be financially devastating if not settled quickly.